Profit from Harry Dent’s prediction? think again

I am exasperated. A client of mine just sent me Harry Dent’s latest book, The Great Depression Ahead, with a note. My client was absolutely convinced that the Dow will go down to 3,800, and he wanted me to do something to profit from this inevitability.

I don’t blame him. Dent is a brilliant man; he makes compelling arguments based on the demographic of aging baby boomers like my client, with just enough data and charts to make the book look authoritative. Couple that with a daily dose of bleak headlines:

Unemployment and the budget deficit are soaring.

The dollar is collapsing, and gold is skyrocketing.

The U.S. is losing its mojo to China.

No wonder he thinks the market is getting way ahead itself.

Let’s say Dent is right. Can we profit from his prophecy?

I highly doubt it. If Dent is right, apparently other market participants (who have collectively decided that the Dow should be at about 10,300) must be brain-dead. Nothing in Dent’s book is a secret, at least not after the book was published. Yet, they can’t see what Dent sees. If they don’t see it today, there is no reason to think that they will see it in the future. If they don’t ever see it, the Dow will never go down to 3,800. Think of it! If Dent were to pass away today, the world might lose the only person who knows the true value of the Dow.

Don’t rush to short the index just yet! What do you think? share your thought below.

“If Dent is right, apparently other market participants (who have collectively decided that the Dow should be at about 10,300) must be brain-dead.”

I’m not sure if Dent is correct or not, but this kind of reasoning is suspect. The Nikkei was once at 40,000 and the Nasdaq was at 5,000 ten years ago. Oil was $147 a mere 18 months ago and crashed all the way to $36 in a matter of months. Which view was the brain-dead one?

Mr. Market doesn’t always get it right. I think that, at least, would be an obvious lesson to draw from this crisis.

I do agree Mr. Market doesn’t always get it right. However, ex ante it is extremely hard to tell when the market is right and when it is wrong. Those who claim otherwise are selling illusions. (Ex post, we the benefit of hindsight, it looks obvious. )

Another point I want to make is, Dent was predicting Dow 40000 at the peak of the bubble in early 2000 and Dow 3800 at the bottom of the market last March. If Mr. Market was crazy at those times, Mr. Dent was undoubtedly crazier.

Thanks for the reply, I am familiar with the EMH. Again, I don’t know if Dent will be correct, but I think he’s generally been right about the direction of markets, which is consistent with his theory that longer term cycles are easier to understand than are shorter term ones. Dent said that there would be a recovery due to massive government stimulus after the first leg down (with the Dow going to between 10,000-11,000), but the second leg down would take us to the levels you mentioned above. For the record, Dent merely confirms my own biases (I’d been waiting for a crash far longer than he had)–I actually didn’t know anything about him prior to a few months ago.

Given your views on efficient markets, I would assume you disagree with the massive monetary and fiscal stimuli undertaken by governments around the world, correct? We can only be postponing an inevitable adjustment in the economy, I would assume would be the view of the Chicago School. Had the US government not stepped in with $4.4 trillion of support to various markets, do you think we’d be closer to 3,800 than 10,000? Why was this unprecedented level of support for the market necessary?

Interesting to read this forum on 9th Feb when the Dow has dropped below 10,000. I also notice there is no response from investment-fiduciary to Jay’s last comment. Could this be due to him talking through his wallet perhaps?

Great point Jay made about the future of the Dow if the Governments of the world had not interfered. If interference had not happened would Dent then be the crazy man you are trying to portray?

I am cautious of advice and commentary that is as radical as the opinion they are commenting on.

You know what markets do? they fluctuate. After rallying 60%, dropping 5%-10% is simply normal fluctuation. Let’s me remind you, the Dow has to drop another 6200 points before it catches up with Harry Dent’s prediction.

If demographics is all that matters, why you should consider the impact of government interference? In fact you asked the right question, the world is too complicated and way to unpredictable to be predicted from a single lense.

Jay, you are putting words into my month. Putting aside that I thought about the $4.4b government intervention, you do admit Dent did not predict the government interventions right? Why not? Is it not in his prediction model? What other things are not in his prediction model? The morale of my post is, the world is way too complicated for any one person to predict.

Gee, I am REALLY exasperated. Even with the lessons from the immediate past of Nasdaq 5k+ in 2000 and $mil tract homes in 2005, we are still supposed to believe in the collective wisdom of the masses to rationally value assets.

Did Dent not predict Dow 35,000 in early 2000 and 3,800 early last year? The collective wisdom of the mass can be wrong, but there is no evidence yet that any one person can be consistently smarter than that collective wisdom of the mass. Then again, who am to say you can’t believe otherwise. Maybe you want to live in North Korea where they REALLY believe one man is smarter than the rest combined.

I did not say that I believe one man is consistently smarter than the market.

I said the comment you made that “all the other participants who collectively think the market should be at 10,300 must be brain dead” so therefore anyone who thinks otherwise must be wrong is a patently false idea that the examples I just gave should have proven to you in and of themselves.

Do you not remember the absurd comments of Greenspan? ” the collective wisdom of the market says NASD belongs at 5k, who are we to argue”

Do you not remember the stupid notion to justify $1m tract homes to unqualified buyers that “houses never go down in value”

Dow 3800 may or may not be wrong. Nobody knows. Thats one mans forecast. My point is that the masses could be braindead about valuing the market at 10,300. Just because the participants have driven it there doesn’t make it ridiculous for one man to suggest it doesn’t belong there.

One thing that we can both agree is that, the mass can collectively be wrong. I certainly don’t object to someone suggesting the market should be in 3,800 or 38,000 instead. What I do object to is someone claiming those as forecasts, meaning that the market WILL go to that level, and by buying his forecasts, you can make money.

What i pointed out is for you to make money, the mass has to be brain-dead now, and regain their collective intelligence in the time frame the forecaster prescribes and thus drive the market to its proper value. Don’t you think that’s very unlikely to happen?

I got out of the market in Sept 2008, after reading some Dent material. At the time, the brain trust that you imply who knows where the market ‘should be’ was neck deep in wall street bullSh*t. They where brain dead then, and did not see ‘it’ in 08, and so why would you suggest they will see it now. Or will ever see it.
To your article and other comments, if the Dow did not go 20,000 as he predicted and/or if it does not go down to 3800 is completely missing his point. The fact is, it’s completely overvalued now, and anyone really paying attention has to see this. Will it go down to… 3,800, 5,000, 6,000 I don’t know – whatever – the point is , it’s not sustainable at current levels and the ONLY people saying it is, are people on Wall street. (think 08 , same people). Demographics or common sense , take your pick. The market currently makes no sense at all when you look at main street. It’s all smoke and mirrors now. Good luck to you.

I don’t know whats likely or unlikely to happen. In my opinion, the whole system has detached from reality. On the one hand, you have arguably one of the most sub par economic recoveries in history, even with the most outrageous stimulus ever applied.

On the other hand you have one of the most aggressive stock market rallies in history, traversing a distance that usually takes years to cover in a matter of months, putting some averages within spitting distance of there prior bubble peaks.

Does that make sense? Of course not. But its just one more example of the current reality. There are few values at current levels. All is momentum and momentum creates its own perception of value. Markets can be driven further in either direction than anyone thinks possible.

The problem is that prices are driven so far out of line with value and people like yourself won’t say enough! Just like they justified NASD and housing. Everyone is buying simply because the prices are going up.

Another bubble has clearly been blown and few will say anything as we are lined up again for slaughter. When, where, who knows? You obviously have some knowledge of market history, why won’t you speak up?

The fact that there are people buying this book is one of my greatest comforts in being invested in this market. Dent and Rogers and all the other writers and tv personalities don’t make their money from investing or managing others investments. If they did they wouldn’t be doing what they are doing. Instead they play on the fear and greed of the public by turning up the “noise”. I would be upset if I got out in Sept 2008 and missed the entire recovery. Maybe Harry will share some of the profits from his book to help make you whole. The reality is that the worst fears and greatest expectations are rarely realized. And that is whythose that stay properly allocated based on risk tolerance win the game in the long run.

Touche’ John, asset allocations should be adjusted to reflect increased volatility, investement horizon, and sometimes outright fear. To your point, market timers statistically don’t do as well as those who’s asset allocation is appropriate and understood and who are willing to undergo a “gut check” every once in a while.

That said, sometimes we must act on a hunch. Case in point, I took 60% of my total invested funds a month ago into cash because I’d made off like a bandit through a 60% recovery from Dow 6600. I think we are in the likley on the cusp of a substantial correction, if not secular bear (Dent is more so, but on the same bearish side) and will likely jump back after we get back down. Look at the VIX and yesterdays 1000pt intraday drop! Investors are really jumpy!! Just where I will get back in I’m not sure yet.

Dent is not a prophet. But he does understand and describe macro trends quite well. He’s just one source to read to come to your own decided approach.

Response to the comments under “Profit from Harry Dents prediction?, Think Again”: I am familiar with Harry Dents predictions, his demographic theory is basically sound. He is not great at timing his predictions, but but he has been generally correct. For example, approximately five years before the DOW hit 10,000 in the 90’s he predicted a DOW of 10,000, and the DOW did hit 10,000 the very year he said it would, this based on birth rates and basically the baby boomers going through their peak spending years driving consumer spending. Now as to the comment above, “apparently other market participants (who have collectively decided that the Dow should be at about 10,300). Note the date of the comment Jan 2 2010, Dent predicted the beginning of the decline to start by mid 2010, and I know because I used subscribe to his monthly newsletter. The markets are very dynamic and each trading day unfolds a clearer picture for each leg of the markets direction. Things change, like Dents prediction of DOW 35,000 which after the huge Jan 2008 sell-off had to be re-assessed because his prediction was based on a percentage increase from the current levels at the time. Granted I think Dent used a multiplication factor that was too large a magnitude, but the entire rally from March 2009 to now has been led by bank stocks whose profits have been dubious. The banks received bailout money from the Federal Reserve at zero percent, and I believe they lent the money back to the Fed at 5%, and then made money from trading vehicles like the commodities. The banks certainly didn’t make money from lending, or not much, and then were allowed to pass all their bad debt to the US tax payer, now nice. Well, I think we all saw the weakness that is in the markets last week on May 6th with the markets sell-off of 1000 DOW points with a follow through sell-off the following day. Note the bear market rally from Mar 2009 to today which could very well be over. Oh and by the way does anyone know anything about Elliottwave theory, if the count is correct we are starting wave 3, the first wave of which was 17 months from the peak of 14,000 either in Oct or Nov of 2007 to Mar 2009 and now wave 2 a 13+ month bear market rally from Mar 2009 to today, and then now could start the next wave 3. For those of you that don’t know in Elliott Wave theory wave 3 is always the longest wave with the largest momentum, and this next wave could be the biggest downdraft in 80 years.

… Using data from newsletter tracker Mark Hulbert, syndicated columnist Eric Tyson showed that Robert Prechter, publisher of the Elliott Wave Theorist and leading practitioner, has underperformed the broad market averages by 25 percent per year since 1985.[24]. Mark Hulbert in November 2009 wrote “Prechter’s advice over the last couple of years has been top-rated. It’s not just that he was bearish during the financial meltdown — he also did a good job of playing the various intermediate-term corrections along the way.” However this top-rated performance was short lived given that Hulbert notes that “Prechter’s longer-term record couldn’t be more different. The last time that his newsletter recommended that traders be long stocks was in 1997, some 12 years ago. In fact, during the bull market of the 1990s, traders following his advice spent most of the time short the market or in cash. This helps to explain why the newsletter’s timing advice for traders is in last place for performance over the last 20 years among all stock market timing strategies tracked by the Hulbert Financial Digest.”

First …I am not a real player in the market or an avid investor… so with that in mind … but , you are saying you would be up upset if you got out of the market at it’s highest point in history and avoided a 50 % – 60 % drop in your assets. What ? Lets do some simple math . In simple, general, indexed terms … if you have $100.00 and the market goes down by 50% , you have $50.00. yes ? If that $50.00 goes up 60 % ( recent rally ) you have $80.00 yes ? But… I still have my $100.00 which is now actually $105.00… and I should be upset ? What ?
The market is still well below it’s highs last time I looked. The market is only up 60 % depending on where you start counting from… go back another year … And… if the market is essentially a zero sum game, there has to be a lot of losers for those that saw 60 % gains.

The REAL noise is not coming from Dent , Schiff and the others like them, that’s just the truth you hear, and it hurts. The noise is coming from the main street media and self interested brokers etc. , talking up the market to sell stocks and to get new ‘average’ investors back in …which for the most part, are staying away .

Some one please explain to me how the market is where is it is when …. unemployment is 9.9 % . Actual number more like 17 %. Housing prices still falling , Option Arm and Alt A mortgages starting to reset and foreclosures increasing again . Half the population currently underwater in their mortgage . Fannie and Freddie asking for Billions more in bailouts today after an Xmas Eve stealthy piece of legislation was passed to give them no limits. A lot of the wealth of Americans stripped away, while debt levels remain way too high. HFT ( high frequency trading ) commonly done in milliseconds, skimming off transactions and effecting and influencing markets like we have never seen before. (Think last Thursday). Trillion dollar bailout ( bandaide ) in Europe just to keep things ‘floating’ along. The fiscal equation is still not sustainable in Europe or America. Banks of computers controlling the market and reacting to every nuance. But …Ignoring some, then over reacting to others.
Explain how any of this makes sense for a market to rally like never before in history . What is the rally based on . It can’t be the numbers. Add Dent’s demographics to the picture and how much more do you need to see the bullshit and disconnect between Wall St. and Main street. Like I said, common sense or demographics, take your pick, the market is synthetic and is plainly and simpley disconnected from reality . Good Luck to you.

You’re math is correct with respect to market losses, but you said you got out of the market in Sept. ’08….during which the S&P ranged between approx. 1280 and 1106. This was well of the “all time high” and right about where the markets are ranging now. So you basically broke even, albeit with a smoother ride, relative to an equity investor who rode it down and then back up. However, since most investors maintain more balanced portfolios (getting back to another poster’s point about asset allocation), there’s a good chance you’re actually up since Sept. 08 (thanks to the performance of your fixed income holdings since that time).
However, if you believe the musings of the Dents, Tices, Schiffs of the world, I believe the best place to be is in cash. Trying to actually profit from their economic forcasts is risky, because you could lose so much money waiting for them to be right that your math regarding losses prevents you from ever profiting from them (look at David Tice’s Prudent Bear Fund performance since inception in 1996, Shiffs performance in 2008 was brutal).

I made the mistake of subscribing to a couple stock investor newsletters many years ago. One consequence of that action is I have been included in the mailing lists that are sold or exchanged by these advice peddlers ever since. So I have been receiving unsolicited sample newsletters from all kinds of stock advisors. Dent is not alone in predicting extremes, I have seen it from many others. One thing these guys all have in common is their predictions NEVER come to pass. When I see these sorts of predictions and analyses for sale, I always wonder why the authors want to clue the rest of us in? Can you imagine the money you could make profiting from this knowledge if you were certain it was right? The potential profits are much greater if you keep this knowledge private or sell it only to a small number of select wealthy investors. Suppose by some magic you were told for certain where the major market indices would be a year from now. Would you be very selective about who you shared this info with, or would you publish a book to let anyone willing to buy the book know? I submit you would only do the latter if you were unsure of the accuracy of the information.

Harry Dent is selling an hypothesis for which he gathered data to support. When you read his thesis it sounds very convincing. But the same is true for every Tom, Dick, and Harry who has sent me a newsletter claiming an insight that everyone else has missed. They are all selling a story, and it matters not whether it is true, it only matters whether they can convince you to buy the story and/or a subscription to receive continuing updates on the story. They make their money by convincing you they have insight to which you must purchase access. There are millions of suckers out there, so if they are wrong and you get burned or disillusioned, they don’t care because they can come back again with another story which they can sell to a whole new set of suckers.

Having said that, I believe the worst is still yet to come. All kinds of “bubbles” still remain in the US financial landscape. Until these bubbles are popped and healed, a crisis will ever loom on our horizon. The long term effects of a crash like 2008/09 do not materialize for some time afterwards. You would expect the rebound we’ve had and you would also expect another leg down, followed by a lot of pain for a long time. With all the economic stimulus from the Federal Reserve and the US gov’t, there is still no sign of significant inflation. That is the single biggest indicator of how bad things really are.

I have seen criticism of Dent’s specific numbers (40000 high, 3800 low) from different sources, including here, but I’ve not seen any solid criticism of his basic predictions of the direction of the market/economy (e.g., Depression is a normal, healthy, but painful part of a 60-80 yr demographic driven cycle, and we’re headed into one). The only real criticism of his theory is that it is exactly that … a theory. I’ve never seen anyone suggest reasons his theory is incorrect.

I don’t know. I pickup up Dent’s book in May, and ended up moving ~700K into cash. So far, I’m not sorry I made that move. I don’t plan to try to short the market, like your client, but I do think I’ll sit out for a little while longer to see what happens.

Investment-fiduciary and Brian – With respect – Why is it that when Dent and others come out with a theory that promotes caution …everyone shouts… he just selling his book . He is not credible , it is a self indulgent money making scam. I find that ridiculous . You don’t have to agree with it , but ignoring the content and logic of the theory and deflecting the discussion to a book selling scam is a really weak response. Why is it then ….when the investment-fiduciary peddles his portfolio idea’s to make his commissions, it is some how OK . Why is it OK for one side of equation to have an opinion and make money off that opinion, but not the other side. Coaxing people to invest in asset allocation concepts or they will not get the returns they should… and will loose potential profits, is using the same fear tactic …but to a different end. So why ‘is’ investment-fiduciary sharing his jewels of wisdom … to gain clients …to make money… imagine that … Just like Dent. I say this to illustrate the argument can be deflected the other way, and it is equally cheap.

And for the record Brian, Schif nailed the housing crisis… so don’t say they are NEVER right… That is just wrong. Also you said “There are millions of suckers out there, so if they are wrong and you get burned ” Nothing could be truer except you applied the statement to the wrong side of the equation . You usually get burned by gambling money not by preserving wealth or being cautious.

Interested reader – thank you for your feedback. I was in the market for many years with two different ‘financial advisor’s’ and never seemed to get the returns they promised. They all peddled their funds, stocks , and idea’s that made THEM the most commissions. It was frustrating. I started moving money away from them and into fixed incomes early 2008 with the last being taken out of the market in Sept. 2008. What I was reading at the time concerned me .( Dent and many others ) So I made the move. I do not regret it one bit.
I understand what you are saying about market timing but I don’t understand how I can “loose” money unless I gamble it. Now, I know what you mean , I will not not make as much as I might if I gamble with it, and if I guess right , but that is a lot of ‘if’s’, especially in this economy. In my opinion people need to understand you are not ‘loosing’ money , you are ‘preserving’ your wealth by staying out of the market. I also find it ironic that people who lost 10’s of thousands of dollars in the market say to me ” are you not concerned about inflation ” to which I reply ” I am not as concerned about inflation as you should be about the wealth they stripped from you in the market, and your house equity” I always found it surreal to be talking to someone about inflation who just lost $40K in the market.

Folks if you want to play the market fine . It ‘s gambling, it’s synthetic, and the casino is tilted in favor of the house as always. I have read a lot about it over the last two years… about the meltdown and how the market really works . ( no… not just Dent and Schiff’s stuff ). I am certainly no expert, but simply put… after reading what I have read, and learning what I learned, I would have to be an idiot to put money in the market right now.

I enjoyed all of these posts. Regarding Dent and Prechter – while their timing might be off, their logic over the years has not been. I saw the response above that Prechter’s ‘timing newsletter’ has underperformed since 1997. Take a look at where the market bottomed last year – all the way back at 1996 levels. No Precher was not wrong. Exactly the factors he argued would bring the economy down eventually did. What he did was underestimate how far momentum can carry a market. However, common sense says that momentum driven by massive debt can only end one way. Prechter was right on.

What I’ve learned from reading Prechter and Dent is to take their arguments very seriously – just use my own judgment for when to shift assets. I’m sticking with Dent’s and Prechter’s underlying logic. However, It’s up to me to decide the right time make the necessary investment choices.

I recently read Dent’s book. I found it interesting. I found ALL of these posts most helpful. I like the tension between different opinions as it is within this crucible of conflicting views that truth can be found.

Here’s the conclusion to which I’ve come. Debt is bad (for banks, governments and individuals). Demographic trends (i.e. baby boomers moving through a predictable cycle) are real. Housing prices are still unsustainable no matter how much the government tries to prop them up by buying an unprecendented 98% of all mortgages through Fannie and Freddie.

It has become apparent to me that something has to give and all the asset allocation in the world will not protect one from what is inevitable. Namely, a return to sanity – living within ones means (governments and individuals), self reliance, and ultimately, normalcy as defined by moderation and compassion for our fellow man!

In the end, the superflous fluff of selfishness, greed, debt, and fear will be shaken out of this market, either forcibly or by our own free will. We (the government) can try as hard as we want to hold on to this crap but it will be like trying to stop the flow of the Mississippi River with a single stick – it aint gonna happen!! This mess is far bigger than any government and we may as well take our medicine now (look at Japan who refused to take their licks, and they’ve suffered for decades!!)

That said, I think it is a bit crazy to think anyone can predict when we will reach critical mass, although Dent’s trending observations are hard to argue against.

Mr Market … Apparently you aren’t familiar w/the specifics of Dent’s book (The coming depression). If you aren’t inclined to read the book, Dent provides audio mp3 files you (and others) can listen to summarizing his demographic projections on the economy & markets on his web site in the “downloads” section. I suggest you become better informed of Dent’s theory before further commenting.

In 2008, Dent proposed two scenarios for the short term Dow between then and the end of 2012. Scenerio #1 is the one he now thinks most likely, in which the federal gov’t stimulous is massive and effective (which it of course was, although some think it should have been even larger, & yes, in the fall of 2008, he forecast the federal gov’t would likely implement a massive stimulus, which it did).

In case #1, going forward from the fall of 2008, Dent projected the Dow to initially fall (which it did to reach a low in the 6000’s in March 2009, as Dent said, due the credit crunch) , then to ride a bear market rally (due to the stimulous) & reach about 11,500 in the late 2009 to late 2010 timeframe. This bear rally for the most part he projected being due to the effect of the stimulus (which it is well on the way to doing, as the Dow is in the mid-10,000’s at this date.)

Dent predicts going forward from here, that after the stimulous runs out (in late 2010) , the Dow tops out in the mid-11,000’s, and then the Dow will retreat, and reach new lows (compared to March 2009) in the 2011-2012 timeframe.

Your critique of Dent seems to be based on a lot of handwaving and straw man arguments. Dent’s past performance all the way back to the early 1990’s has been excellent on his long term calls on the long term direction and timing of the market (2000 market peak, 2007 market peak, 2007 real estate bubble), but has missed the mark on the actual level of market peaks and valleys, generally considerably overestimating the levels of the peaks. I believe in his book (the one published for that time period) he initially predicted 36,000 for the 2006-2007 Dow peak, but as 2007 approached his group noted the market’s divergence from his model and revised his forecast to 18,000 as I recall. The market peaked in the timeframe he projected, but peaked at the Dow in the mid 14,000’s instead of the 18,000’s.

Your critique of Dent may have some merit, especially in his short term forecasts, for example anyone may refer to an investment index that his firm seems to be involved in “DENT” which has underperformed the market. I certainly wouldn’t suggest the market will peak or valley at the exact time period he says, and I wouldn’t necessarily believed the peaks and valley’s will be at the levels he projects. But his past performance shows he’s able to forecast important market peaks and valleys and their time periods over the course of time frame of projections running as long as a decade.

Your objection to his long term forecast is specious and entirely un-scientific. For example, you ask “Can we profit if Dent is right?”. Then you fail to address your own question.

Of course it is possible to profit if Dent is correct. Profiting from Dent’s projection (if he is correct) is very simple through various combinations of shorting, inverse index funds, and put options, depending upon one’s risk tolerance. He also offers projections on emerging markets, real estate, and commodities, and one could easily profit on these also (again, pnly if he is correct).

To imply that since the market is currently priced above 10,000, it must be high for a reason and therefore isn’t likely to go down (as Dent suggests) is a ridiculous statement simply on the base of it. If a scientist were to present such a silly argument at a scientific conference they’d be laughed off the stage.

I personally am not carrying water for Mr Dent, and have no idea whether Dent will be proved correct or not. But your critiques on Dent’s & others’ forecasts and the methods are only worthwhile if your own method of critique is scientific, critical, and unbiased.

On 9/16/09, AdvisorShares launched an ETF called “DENT”, co-managed with Harry Dent. Here is a portfolio that has $100,000 at the close of the launch date. Let see Harry Dent can do better than his last fund (AIM DENT Demographic Trends Fund), which was shut down after 4 abysmal years.

As far as supporting Dent and noting that his timing “may not always be right,” trading is *all* about timing. And to Bob up at 21, HFT had nothing to do with May 6th. I day trade the ES and got short the market at 1:10, an hour and a half before the “flash crash” occurred.

Not that I claim any kind of special ability – it was crystal clear to anyone watching a chart or listening to a squawk box of the S&P pit. Market was nothing but sell orders, especially in the 15 minutes leading up to when it really started to cook off. No bids and aggressive selling created that “crash,” not HFT.

But anyway, back to the subject at hand. If you took Dent’s advice on his July 2010 update and shorted the market, you’ve done nothing but lose money. And it has nothing to do with Dent’s view on the economy – heck, I agree with him that there’s entirely too much debt. The “problem” is that the market isn’t the economy; the market is the market.

People above have expressed the opinion that the market is “detached from reality,” yet when has it ever been any different? The market is nothing more than a game, and the reason why you lose is because you treat it like you “should” – you sell on bad news and buy up on good news.

Unfortunately the smart money uses bad news as an opportunity to soak up massive amounts of supply on the cheap (what they’ve been doing for the past couple months and were doing like crazy early Friday afternoon), and then later once they rally the market sufficiently to want to take profits, they take their profits on good news while all the retail traders are piling in.

This is the way the market has worked for at least over a century. Longer I’m sure, but these are the very same principles taught by Richard Wyckoff in the late 1800’s and early 1900’s and they still work just the same today, so this notion of some sort of recent disconnect of the market from “reality” is quite incorrect.

If you believe any different, just think about oil at $140 when everyone knew it was going to $200 (just before it fell to $40), or when BP was going to be bankrupt by the end of the quarter, and now look at the stock (though it probably will pull back a few bucks again for another test before continuing to rally), Goldman traded as low as $47 at the end of 2008 when they were supposed to get taken over by the government and look at it now (although off its highs of almost $200).

Or look as recently as this past Friday. “Bad” unemployment, Goldman announces that they’re lowering GDP expectations (yeah, because they have nothing to gain by panicking people out of their positions and then buying it up), and over in the S&P futures we still rallied 16 handles off of our lows.

Or what about Tuesday’s bad news, where CNBC said that pending homes sales “plunged,” yet shortly after that announcement was our low for the day? Look at Black Monday or September 11th, both huge shakeouts on bad news before rallies ensued.

This market’s buying up bad news, and heck, even going so far as to sell off any good news right now just to flush the retail traders getting long into the news, just to buy it back up again off the bottom.

So now is certainly not the time to be short the market. This market’s going to rally until they start distributing, and you’ll certainly know when it’s coming because the news will be so bullish on CNBC that you won’t be able to stand it.

I am not a market timer, but if you want to be one, you have the right approach.

There is a simple principle at work here:

Cost of capital (for business) = Expected return (for investors)

If money are flowing into one particular sector, be it oil or China, because CNBC is yepping about it, the cost of capital would be lower for the sector and the expected return should be lower as well.

I sure try to be a market timer, given that I day trade and so timing is absolutely everything. Especially in the futures market with the leverage over there …

Not a plug or anything, but if you’re interested you can click my name and check out a blog I’ve thrown up over the past week that describes some of the methodology that I use, as well as a blog post that I put up today which describes the past couple months of trading, as well as its importance for setting up this coming week (which looks to be a very promising one!).

I understand that short term market timers aren’t concerned much about Dent and wouldn’t hold his opinions highly. Judging his method based upon the ‘DENT’ etf performance tho isn’t likey to be an effective measure of the method in this Bush/Cheney depression era going forward, as ‘DENT’ etf only started in Sept 09 and is about the same price now as then — according to what I understand it seeks to minimize variance (risk) through diversity and doesn’t simply trade the S&P.

Dent’s method isn’t geared to short term market timers. His trend projections have been proven fairly accurate over the past 20 years when considered over a 2-3 year time frame. On shorter time scales he is wrong quite freqently. But for his major forecast trends, the 2000-2001 peak, the 2006-7 peak, and 2008-2010 initial crash, all were all forecast years in advance. Whether he’s correct about about the next 3 years, time will tell. Dent’s method appears to me to be geared for those interested in investing for the long haul & is geared for those with a steady head & perserverence.

Short term market timing on the other hand is geared for those seeking quick thrills and excitement. It certainly isn’t for the faint of heart. A short termer will pull out of the market on a moment’s notice, the first sign of bad news. Of course sometimes the news is only slightly bad, or the bad news is seemingly balanced by some good news, and the short termer won’t notice what is happening as the market slowly leaks, riding the market to the bottom. Either that or the short term market timer takes a bath when the market takes a 1000 point dive in 2 hours as happened last month. And the next time this type of event happens, the markets may close for a week or more before they open again. There may be few buyers for the short termer to sell to. Who knows what the markets will open at? Of course the market may go up 1000 points too — in 2 hours.

Like I say, I have no idea whether DENT is correct or not. It seems to me that if you believe just two of his charts he presents about the US popuation: his data showing average personal expenditures vs age, and number of individuals vs their age (immigration adjusted) — well, it would be hard to argue that those companies who get most of their revenue and profits selling goods and services to US residents over the next 15 years may be in for a world of trouble. C’est le vie.

I am against short-term market timing.
I also think demographic is but one small piece of information factored into stock prices. It is preposterous to use one piece of public information to predict stock prices.

As to the performance of DENT, its beta is 87%, slightly less volatile than the S&P 500, but its alpha is -10%. In less than a year, the fund has already under-performed the index by 12%.

I have really enjoyed reading all of the comments dating back to January 2010. I am not a stock market investor like most of you. I develop and own commercial real estate. I have read all of Harry Dent’s books. The first one I read was in 1993. While I do not believe anyone is ever 100% correct, I liked Dent’s theory and decided to structure part of my real estate portfolio such that I starting selling parts of it in 2005, 2006, 2007 and early 2008. My friends in the real estate business thought I was crazy at the time. I sold based on Dent’s predictions. I was able to sell out of a good portion of my portfolio, pay capital gains taxes, pay off debt and stockpile cash. I am a VERY happy man today thanks in part to Dent. Dent was not 100% correct but his theory for real estate has been a lot more right than wrong.

As just one small piece of the boomer demographic, I have a huge interest in the the outcome of all this thrashing about. From what I see, this has less to do with group-think boomer demographics as it does with the impact of huge government debt, “economic justice” (wealth redistribution), and direct government intrusion into the free marketplace. I see bumbling politicians like Joe Biden tell the public that we’re headed in the right direction. I see socialists that believe that more debt and government spending is the cure for the failures of the previous “stimulus”. Dent may be dead wrong in his latest predictions, but hey: any of you folks been to the mall lately? It looks like a ghost town. Nobody’s buying anything right now because they don’t have any money.

Chris Kellum/#32, I think you channeled me with your post. Although I don’t day-trade, I am a position trader and occasionally latch on to something I can pay long term gains on. I can not agree more with your remarks about the reality of the market. Too many can’t recognize the disconnect. BTW, I was mentored by a CMT in LA but I am also a Wyckoff student. That curriculum transformed my thinking. I built my business around risk-management, appropriate hedging techniques and have never been afraid to sell, but I always give my names a chance to stay in a portfolio.

I don’t need to swing for the fences. I will always be happy for my accounts taking 90% of a market’s advance and only giving up 60% of its declines and will do so with a turnover of (usually) less than 80%. Clients sleep well at night with that. Going full cash or full long is a portfolio relative strength killer, not to mention the havoc it wreaks on a client’s psyche.

With respect to Dent, one of my AE’s in the firm I was the principal of was a Dent disciple. Until around 2002, that is (the 3rd quarter, to be exact). It was at that time that he realized that not having a controllable PROCESS for managing risk was a recipe for disaster no matter the “long term” forecasts. Dent makes solid assumptions about the impact of demographics and they are plausible… long term, but how many of us here really have 70 years and unlimited capital to be able to “actualize” a couple of these super-cycles?

While it’s not apparent due to the parabolic rise of the markets well into 2000, I’ll contend that the bear was coming out of hibernation in late 1997. Mania kept him out of sight. Astronomical forecasts made easy sense – all we needed were 7.2% returns for ten years to double the index values, but–by gawd–12% returns are normal and to be EXPECTED!! (Sarcasm intended.)

I about soiled myself when I heard real estate speculators saying the same thing in 2006… that 12% returns in THAT market are to be “expected”. Lemmings… …

As the author was trying to point out, Dent is brilliant. The author also has noted that the true value of the market is exactly where it is right now. It is where the buyers and sellers last met.

On that note, does anyone really think Warren Buffet added all that alpha to his holding company in the 80’s and 90’s by buying and holding blue-chips? Think again please. He had trading desks around the country putting huge positions on with margin around the core positions that remained constant in the annual reports.

Rukuyser?!? He was an S&P Futures mad genius… trading around a core of treasuries.

Jimmy Rogers? He can’t even be compared to Dent, he is too much better. Remember this… he WAS the catalyst within Soros. Soros was the connection to the “secret people”. (There’s also an unknown reason he is no left Quantum, and I can only guess as to what it is. I think I have a pretty good sense even if it is only second hand.) As for Rogers general themes, I think they have worked out quite well.

The difference between them and Dent and the general populace?? These guys either know the market or hire those who do.

The moment you are held out as a “professional”, you are held to a standard that’s only as good as your last recommendation. Problem is – the one’s scrutinizing you have not had the ability to see how things are managed on a daily basis (unless it is an audited account), so things are either judged out of context or or with old information. I can tell you to “BUY XYZ limit 45.67”, but unless you do exactly as I do every step of the way, your results will vary.

MS… currently 80% long, stops in place and looking to get more invested (as of this post) – and not caring whether the price-capped DOW is 25,000 or 2,500. It matters not.

I read Harry Dent’s books over a decade ago. I thought he made good sense. My only problem is that I got too old to act on things I read in a book. Shortly after 2001 I developed my own asset allocation plan and stuck with it. The classic plan that worked for me is not market timing, but dollar cost averaging and rebalancing once per year. I put my own equations on whether Dent is right or wrong. I’m not 100% in agreement with anyone. But by golly, I just want to explain that I met a ten year financial goal early by one day.

There are about 12 weeks left for Harry Dent’s predictions to come true. About three weeks left of a historical bad month. If the GD does not happen this month, it probably won’t happen by the end of the year. I pity the people who are betting everything they have on Harry Dent.

If the book does not make good sense, it would not sell. Whether it is right or not is an entirely different matter. Good for you that you are too old to follow him. You would have nothing left for your retirement plan had you done that.

I’m just reading this now and from March 2010 when a lot of these comments were done, until now, the dow has risen 16% (16 months). Seems the market did have it pretty much right. Risk free rate plus an appropriate compensation for taking on the risk.

All I know is I should have bought shares in Apple Computer in 2000 as I wanted to do, but didn’t have the cash to do it. A person is always counseled not to invest in only one company, diversify etc. But I knew Steve Jobs and his gifts, knowledge of the industry, and his attitudes about keeping the family jewels, and buying then (2000) made very good sense, and nothing would stop Jobs from taking Apple back into a money maker. I just knew it, but what I didn’t know was the eventual scale of it’s growth. I simply believed the company would approximately double in value every year. And I was right, it has nearly done so ever since, up or down the industry. Had I invested $100 in Apple stock in 2000, I’d have a quarter million today. I haven’t done the math but I expect I’m close to accurate.

Actually, I only want to know the general trend of events and markets over the next few years. My guess is the economy will have recovered fully and be moving ahead at a respectable pace by 2017. I said that aloud in 2008. It just felt right. That’s because I figured the market “crashes” once every ten years or so and takes another decade to recover before it takes off again. The only difference now is I believe in general we will have run out of bubbles by now and growth overall will remain the same in the long term. The spikes up and down mean nothing to me, I can feel the crashes coming shortly, especially when I start hearing “unlimited” “perpetual” and “inevitable.” You simply sell while things are going up and not try to guess the day the hour and the minute. Buy low when things seem to be headed lower for a stretch. Pretty simple advice, it seems to me. Anyone with half a brain should be able to figure this out, and if they can’t they will lose a lot of money over time. It ain’t rocket science.

Michael I am not much at investment success. I have managed to accumulate some wealth through the tsp plan at work. The G fund has saved me a lot of money over the last 3 years or so. I saw the S fund was on the increase up until about June 2011 so I tried it for 2 weeks and lost about 5G’s. Bad decision so I will stay in G now until retirement. I received an e mail about Dent’s plan and it all sounded good. I could pull my money out of tsp, as I am over 591/2, but after reading this blog I have changed my mind. I am getting to old to gamble again. I have tried commodities that were supposed to be computer generated short and long transactions and lost about 10G’s. It seems someone is always trying to sell a get rich scheme. For that matter I have never been to Vegas maybe that would make about as much sense as some of these marketing schemes that are supposed to gain wealth. The only wealth of any substantial amount seems to be going to the authors and brokers.

You are quite right that some one is always trying to sell a get rich quick scheme. Just imagine yourself are in such a business, what would you try to sell? The best way is: when investors are optimistic, sell optimism; when investors are pessimistic, sell pessimism. That’s why Harry Dent did.

About S fund and gold etc. I bet they only caught you attention when they have rallied a lot already and ripe for a fall. On top of that, you did not have a plan, just wanted to hitched the ride. They are not bad investments, they have a role to play in your portfolio regardless their fluctuation.

Lastly, I think putting all your money in G fund has turned out fine so far for the following 2 reasons:

1. The US has never defaulted
2. Interest rate has been dropping since it peaked in the late 70s and early 80s.

Now, the US is on the cusp of default and the low interest rate will not last forever. Putting all your retirement money in G fund is akin to putting all your eggs in one basket, I strongly suggest diversifying away from G fund. If you need to consult with me, use the following link to schedule an appointment with me:

Much of what I hear and see on TV is useless information. At the beginning of every show they encourage long term investing, then for the next 29 minutes they talk about the minute to minute influences on the market today. That’s not long term, but it makes a more interesting TV program than months of reporting “hang in there”.

There is a lot of volatility (fear v greed) in the market today. In early 2008 I got spooked and went to cash (fear). March 19, 2009 I got back in as much as possible (greed). That seems a long time to sit out, but I didn’t know where to go, so I just waited. On 3-19-09 I couldn’t say it was the bottom, but for my circumstance I had effectively doubled my share holdings, up or down. Even if the market went down, I was still double in shares. It went up, I did well. Since then I have tapered out to a 75% cash position to lock in some profits.

Intrigued by the ups and downs, re-entries since then have been a wash. So, I adopted a new strategy, for me. It goes back to my retailing days. Instead of putting a years worth of money in retail inventory, and waiting to sell off the merchandise (buy and hold), why not put a month’s worth of product on the shelf, when it’s gone, re-invest the capital and capture the profit. Use an inventory management system to replenish the inventory where needed.

In the market, I buy a smaller amount of stock that is under stress, set a sell limit that fits both the potential of the stock and my goals, then capture the profit and re-invest the capital. If I recycle 10k in this manner, 10-12 times a year, then I have the annual earnings of 100-120K, while the bulk of my nestegg is safe. If the market dips, little is at risk, and usually the next bounce will clear the objective. Only time is lost. If it goes according to plan, I move on to the next objective. This is probably not a new approach, but for me it is a new adaptation of another idea.

In sports terms, it’s base hit baseball. More games are won with base hits than home runs, but the game winning home run alaways gets the headline. The guys selling gold, silver, and tip sheets are reaching for the homerun.

Demographics will play a role in our future. Waiting for our government to face the hard realities of this situation is a waste of time. They can’t find one thing to actually reduce in their budget, nor can they agree on an effective tax strategy. So for all of us, we’re on our own.

If Dent is right we are damaged by being in equities. If we are in cash and Dent is wrong then we are sitting on the bench while the real players are winning the game. So, for me, the limited game is where I’m at. If Dent is right, my cash position will be useful. If not, I’m still growing my nestegg, but with a lot more work than simply riding the tide. It is true a rising tide lifts all ships. Equally true, low tide can leave you high and dry.

As a closing thought, it is MY OPINION that much of the financial meltdown can be attributed to the masses of people delegating their investments to other people. Those other people take that capital and persue their own intrests with it. Leveraging and laying off risks. Selling billion $ blocks of shaky mortgages. Earning commissions, transaction fees, and bonuses for themselves. Informed individuals would not deal in this manner.

Instead of learning what goes on within their investments people just handed the money over to fund managers, bankers, brokers, & 401K plans. All of these have an important place in investing. But, had the institutional investors known as much about their financial business as they know about “American Idol” we would have never had the bubbles in the first place, the money would have been elsewhere.

I can’t get my arms around Dents theory that easily. What really has me in total disagreement is the part about silver dropping so low in value.

By and large silver has been held down by gross manipulation practices on behalf of Bear Stearns , Goldman Sachs , and JPMorgan for a total of 40 + years. Certainly no bubbles going on there regarding silver !

In just about every case silver has had the capability to break out to phenominal levels regarding it’s true value yet has been held down.

Looking forward ;

If the dollar should crash then silver will become a true value of fungible exchange.

If the dollar should become incredibly strong then silver will excel in price due to it’s industrial needs and usage.

I like your opening statement – “Much of what you hear and see on TV is useless information.” I call it noise. The media needs to generate enough noise to get your attention so that they can earn advertising dollar.

David,

Dents does not have an investment theory nor a demographic theory. He has a marketing theory: when people are greedy, sell them reasons to be greedy, hence predicting Dow 50000 at the top of the market; when people are fearful, sell them reasons to be fearful, hence predicting Dow 3800 at the bottom of the market. He makes good money from his “predictions” does he not?

It would be a mistake to under estimate demographic arguments in the US and the G-20. Boomers are retiring at the rate of 10,000 per day for the next 8-10 years. As boomers exit peak spending years and transition into less spending and saving, it is reasonable to sell stocks to fund our retirements. As with millions of vacant homes, who will be the buyers of these stocks? Invest for the long run? Define long run. if 20-30 years is your time frame, then back up the truck and load up on equities. Me? I am 61 years old. In 20 years I may not give a dam! (By then there may be enough folks to buy my house and stocks……… get the point. I do not know if Dent is accurate in his market level predictions. But unless the markets are totally independent of the economy we are in for rough times. Compound this scenario with the fact the $6 trillion in personal wealth has been wiped out, we have a president that never had a paper route (let alone business experience), the echo boomers are overpopulated by GED recipients, and entitlement commitments surpass $200 trillion, etc., stc,. and some people may think that having a positive outlook on equities may be reflective of a Pollyanna view of economics. Sorry. But dem’s the facts

The real answer for our economy is to take a world view. Presently, most manufacturing is done roboticly so labor is much less an issue than the 20th century.

If you are the CEO an international company and you need more capacity, you will look at opportunities around the world that offer logisitic, labor force, resources, and most of all a better return on investment.

Better ROI attracts investment capital, that finances new ideas into the products that eventually make it to the masses. When is the last time a Venture Capitalist was in the US headlines?

Reagan is often cretited with the longest peacetime expansion of the US economy in history. Maybe so. At that time the people that put his economic package together also made certain USA had the lowest corporate tax rates in the world.

Today, USA has the highest corp rate and the government wants more. Additonally, an investor then has to pay capital gains on the earnings distributed.

In other countries it is much easier to afford a rate of return to the investor because of tax rates and little regulatory interference.

What if the US Government lowered or eliminated corporate tax and lowered capital gains tax to the lowest in the world. Would they not pick up the revenue from millions of American people working in Mercedes, Mitsiubishi, Siemens, and other foreign company plants built here? Income tax revenues would climb while unemployment expense shrink. That makes a tremendous swing in where the cashflow is going and coming from. Further, we would be creating wealth here.

The service economy is a wonderful thing. It does things we cannot do ourselves. What is the intrinsic value of a haircut, or the meal brought to your table, or last years tax return. They are all of value, neccesary, and enjoyable. But the long term value of last years tax return is not much, a haircut is gone in about a month, and food is a daily thing.

Wealth is created by adding value to things that last. By the dictionary it is : Land, improvements to Land, Natural resources, Value added through manufacturing, and intellectual property.
All of us can’t own a gold mine or the mineral rights to an oil field. Not many will write a classic screen play or string of hit songs. Value added through manufacturing is available to all of us. But our government has arranged the tax codes and various compliance agencies to discourage manufucaturing.

There have been 2 or 3 of the steps removed from the economic ladder that Americans climb. Not every student is college material. Some are more suited for mechanical things. There isn’t much of a ladder for them. My opinion is we will have a much healthier economic picture when everyone is included in the portrait. Some creating wealth building things, some managing it, and some providing sevices we all need.

I think if we should have high inflation, the market would drop considerably. Blue chip companies may be paying about 3% dividends right now. That is competitive at this time with low inflation. If inflation jumps to say 10-12%, will the companies remain profitable be able to raise dividends to be competitive? I first bought Exxon stock in 1981. At the time it was priced about $30.00 and paid a 10% dividend. The Dow back then was about about 1000. You could buy a CD which paid at least 10%. For Exxon to pay 10% now, It’s stock price would have to be less than $25.00.

I do not believe the market will be influenced by demographics. If our economy is healthy, the wealth will have to go someplace. It has more to do with the government mis-managing our economy.

Dear Sir:I cannot know if Mr.Dent is wright or wrong,but on my experience following the predictions of these super-experts cause realdisasters.Martin Weiss called silver a dead duck in 2001,with silver at 4.He called Royal Gold a short in 2000,just to say three years after that he has been the first in discovering the stock.All experts called a crash in 2009 and the market boomed.But these guys always win:the have the cushion of their subscriptions,without paying subscribers for their stupidities.Sincerely iuliano Gatta

I agree with Tom Kane. Dismissing Dent’s predictions, some of which have not come to fruition, is throwing the baby out with the bathwater. I saw him speak last week at the MoneyShow and spoke to him for a while after his talk. His demographic theory has a solid foundation and it is pretty hard dismiss his contention that demographics lead markets. But like all cycles, they don’t come and go right on schedule, they are more general trends than specific timing recommendations.

I may be barking up the wrong tree on this forum since I am a technical analyst and trader but his forecasts are eerily similar to those of some very well known and respected Elliott Wave practitioners I follow as well as by the works of George Lindsay whose counts indicate that given the current pattern which he called 3 Peaks and Domed House, the Dow has much lower to go.

Another of Dent’s points is a valid one – those who bought and held tge SPX or Dow in 1999 -2000 are looking at negative returns in inflation adjusted terms. I, for one, find it very unappealing to hold something for that long while paying fees to loss money.

With a tanking market it’s easy to speak of Mr. Dents work from 4 years ago predicting a depression. Mr. Dent did speak, however, of a US society de-leveraging excesses and a government unsuccessfully attempting to inflate its way out of it. All true so far. He was not wrapped in a particular index level but, rather, an economic implosion.

Where were all the “experts” who knock Dent back in 2008 right before the crash? They were out telling us to “diversify.” If they didn’t see it coming then, why should I believe that the crooks on Wall Street whose job it is to sell, sell, sell, would see it coming now? And if they did, do you honestly believe they would tell you to stop buying what they sell (stocks and mutual funds?)

The collective who has decided the Dow should be at 10,300 IS brain-dead. This is nothing new. The stock market prices stocks based on what is going to happen today and tomorrow, not what is going to happen three weeks from now. People will ride the market up to the very last minute and then jump ship. So, where the market is today is NEVER a predictor of where it will be a few days down the road. For that, you have to look to much larger economic trends.

If the market had a collective brain, it would not bounce up every time European leaders say they are going to do something to right their problems and back down the very next day when nothing is done. The market is primarily reactive to immediate matters. It knows nothing of what Europe will do three weeks from now.

“Nothing in Dent’s book is a secret, at least not after the book was published. Yet, they can’t see what Dent sees. If they don’t see it today, there is no reason to think that they will see it in the future.”

When did the market ever see its own collapse more than a day ahead of the actual collapse?

A major ingredient for a depression, or a “great” recession, besides having baby boomer retiring, is to have Republicans in total control of the government, which happened in 1929, and in 2008. Right now, the Republicans don’t have the White House, nor the Senate. The Republicans did win the House in 2010, and the stock market began to weaken right after. If the Republicans win big in 2012, that would be a double whammy with the baby boomers retiring to trigger off the next great depression most likely. Many rich people with cash like the rich Republicans are waiting for a depression, when they can buy up valuables at fire sales for pennies on the dollar. They will not mind the country falling into a depression whether consciously or subconsciously, and they may even help to get the country to fall into a depression. Common working people like the Democrats hate depressions like the plague as they don’t like to get layoff, and they will try really hard to prevent depressions. With Democrats in total control of the government, depressions (as we know them) can perhaps be forestalled. With Republicans in total control of the government, depressions become likely. With a grid locked government, the baby boomer retiring factor may be enough to create a depression. One of the current problem is that like Japan, the FRB has reduced interest rates to near zero. This means that the savings and bank deposits of the baby boomers are earning almost nothing, while their mortgages, student loans for their kids, and credit cards still are being charged high interest rates by the banks. The banks are charging 10 to 100 times depositors’ rates against the mortgage, student loan, and credit card borrowers. Historically, mortgages rates are less than 2 times depositors’ rates, instead of the 10 times depositors’ rates now. Republicans will let their corporate cronies charge 10 to 100 times markups, squeezing the consumer for whatever the market will bear (in the short term until the consumers are cleaned out.) Business people have a nasty habit of maximizing short term profits, even if this maximization of short term profits may destroy the economy in the long run (like whalers maximized whale hunting profits in the short term until the industry collapsed from over fishing and not collapsing due to any baby boom whales reaching retirement age.) Republicans will encourage and will ease businessmen in carrying out the maximization of short term profits (aka ripping-off the customers) that invariably results in long term collapses from short term excesses (of rip-offs.) After which the Republican rich will take the money and run (to the nearest Swiss or Cayman Island bank.) They will care less in rescuing the common people stuck in the resulting depression back home, other than if they can get what remains of the people at fire sale prices, if at that. Hey, people don’t become filthy rich by being nice like Mother Theresa. Baby Boomers retiring depresses the economy, which the Democrats will try to soften the landing, and which the Republicans will try to take advantage off. The twenty percent rich should vote Republican in the next election, as the Republicans will help the rich to further rip-off the people, the market, the government, and whatever else they can get their hands on. The rest of the not rich, should vote Democrat, if they want to at least try to not get totally rip-off by the rich. It’s a tough world out there. Don’t listen to the sales talk (propaganda) of the rich, who are out on the make to clean everybody out to the bone.

I am a frequent watcher of Nightly Business Report. Harry Dent was the leadoff speaker last night. What irritated me was the deference shown to him by the host and also that he was not challenged regarding any of his prior predictions or his methodology.

Many good comments, thank you all for your insights. Most of this stuff is over my head but I have come to the conclusion after reading many economy-related news and advise for several years, that not too many of us are making any money in the market. The inside traders, Bernie Madoffs, politicians, bailed-out bankers, etc, etc., . are the real winners of the Wall Street Casino. At least Vegas offers drinks on the house for your losses.

You can listen to who ever you want but if you get back to the basis and listen to what is fair and what is not, how economy was designed over the age you will certainly get to the conclusion that something is wrong today.
I am not the only one believing it, look around get in the streets in any streets in all streets look at the people (not only in Manhattan or Beverly Hills) read the news go and see yourself Greeks, Spanish, … the employed in the US the US debts, the unfunded wars, what politicians tell you over and over …
and what can you expect from this ! Certainly nothing great so how the dow could make it on the long term.
Look at the market index the day of Pearl Harbor or Dunkerque it was UP !

Interesting author, blog item and comments. I think Dent’s opinions (for that’s what they are, whether he or others call them ‘predictions’ or not) are a valid addition to the future-watcher’s arsenal. Of course, no one should read anything uncritically, without asking oneself “why is he writing about this?”, “what has he misrepresented?”, “what has he undervalued?”, “what has he missed out?”, “how has the world changed since this was written?”, etc.

H.S Dent never talks about his book saying djia=40k and nasdaq=20k. Then since 2007-8, it joined bear camp and still he has been wrong anticipating collapse.
Rober Precter from elliotwave is also in the same boat. He was correct like many other predicted 2008 crash but since then he is wrong every time. The crash was for 1 year and then bull market started since 2008 March and still moving forward. Many stocks are x10 since collapse.
However, 1 day they both will be right. As we all know market will go donw some time in future.

Michael,
Why don’t you share with us an example from your deep financial understanding which country was able to print themselves out ( QE2, QE3, QE4, QE5, etc. ) of recession over the past 2000 years?….. Really? Mario Draghi’s promises will eventually fall on Germany’s death ears, and the Euro will never survive without fiscal union which is never going to happen. You honestly think the German tax payers are going to do another LBO as when they acquired East Germany in 1992 by bailing out Italy and Spain in 2013? Lol…..

How different are Dents warnings from Robert Rodriguez, Jeremy Grantham, Peter Schiff, Jim Rogers, Dr. Marc Faber, and Dr. Nouriel Roubini’s black swan probability? Wake up – man how many acclaimed warnings to you require? There is going to be massive wealth destruction in the future and no one knows if it’s going to be in three years ( Dent & Roubini) or in five or ten years ( Faber et al ), but it’s coming, bro.

I believe we are in a Barbara Tuchman’s Guns of August moment and no matter how many QEs, nor relaunches of iPhones we are going to pay the ultimate price of our debt, which is going to make the 2008 recession look like a walk in the park.

Dent’s demographics based economic scenarios make a lot of sense to me and seem logical. However, applying that type of lof macro trend logic is very difficult to do on relatively short time frames in the stock market.My own personal observations have been wrong numerous times because i’ve been premature in my predictions. I was premature about Gold by about two years. I was premature about the housing bubble by nearly seven years.The stock market itself, I won’t even bother to predict unless it’s at new highs or lows, or unless I feel like gambling on interim trends.

To me, Dent makes a lot of sense, but acting on that advice in a timely manner, given human nature to want things “Now” can be very difficult..

When the whole world runs on fiat, or “Faith” it’s pretty difficult to predict anything. Economics is not really science, too much human emotional imput. In recent history it’s all about philosophy, do we support crony Capitalism ? or crony Communism ?

The BDI say’s it all right now, the world is deleveraging. Good’s are not being moved in our global economy, we’ve ground to a virtual halt as measured in “Trade”.

Certain industries and stock markets have been propped up by governments using fiat,whether that will translate into increased “Trade” based on production and supply and demand remains to be seen,

If Dent’s scenarios do not make sense, he couldn’t have sold so many books and damaged so many people’s retirement. As you have observed there is a huge gulf between what appeals to our subjective sense and what is objectively actionable in the stock market. So rely on our sense too much, it is too risky to bet our retirement on our sense.

Reading all the comments on this post has without a doubt been an incredibly interesting read, so kudos to everyone in that respect. In regards to Dent’s ability to forecast market behavior, I think that the cyclical nature of what we deem to be favorable in the market is always in accordance to a person’s perspective on the matter. Regardless if we’re in a bull or bear market, ample opportunity exists to capitalize financially given you make the proper moves and along those same lines, you can always lose your @$$ as well.

Dent however explains his views on the markets and regardless if whether or not you believe his OPINIONS is to each everyone’s own. I’ll give Dent credit for ultimately basing his predictions that really fall in accordance with what fiat currency systems usually tend to have cyclical behaviors. People, a fiat system is a classic ponzi scheme that would put Madoff to shame!! We have a fundamentally flawed fiat system where literally, our money is backed by nothing, and you can thank Reagan for that (August 15, 1971). The Treasure borrows from the Federal Reserve and gives an IOU promising to pay it back plus interest. Then, foreign countries buy these IOUs from the federal reserve in the form of bonds. When it comes time for the Treasury to pay back it’s debts, it goes back to the Federal Reserve and from thin air, prints more money to give to the Treasury and the cycle begins again. THIS IS NOT SUSTAINABLE!!!! Every fiat currency system in existence over the course of human history since put forth by the Romans has collapsed within itself. There are no exceptions. Dent is simply promising to have the market deliver on the inevitable and is giving an effort to time the fall of the market.

I may not be as exalted an expert as the venerable Mr. Dent, but it seems to me that predicting where the Dow will be, based on a loose interpretation of an incomplete formation in the S&P chart is pretty ridiculous. throw up a comparison of the S&P, the Dow, Nasdaq, and any other index you can think of and you’ll see that the “dreaded triple top” in the S&P is a complete coincidence, since the two dips that make it happen are reproduced in every index but the tops aren’t. As for the fundamentals, everyone always likes to talk gloom and doom. It makes the bottom lines seem better when they do better than expected. Underpromise and overdeliver is always a winning strategy.

You hit the nail on the head about the logical fallacy that people make with this stuff. Fine, you’ve got a genius that can tell you the very year the market will tank. That’s useless and I speak from experience. In 1987 I was that genius. Sold everything about now. Market didn’t tank until late Fall. Those dummies that stayed in? Six months after the correction they had more than I had as I had pulled out too early.

So, does anyone think he knows the day? Week at least? Of course not. That’s the rub. Knowing the year SOUNDS like great prescience but it’s really useless. Remember Quasar’s old slogan? “Slightly ahead of our time”? I finally understand the importance of that first word. There have been thousands of genius’ way ahead of their time. They died in obscurity. That may be our fault, but it’s financial reality. If it wasn’t all those inventors that KNEW there that flying machines were possible wouldn’t have died largely penniless. Now, if someone had beaten the Wright Bros by a month…they could have cleaned up!

QED: When someone says, “I have some really important advice about the market”, you respond, “Is it going to happen in the next few days? A few weeks at the most?” If the answer is “no” then you can tell that you are quire sure they have nothing to offer you. Try a lecture hall. They’re talking theory and that don’t pay the bills.

I like dent he makes you think about would of should of . Us his info and all others make your mind up not with just one persons input ,us them all . I’m sure he right about the Dow taking a big dump. But Big Ben will try to not let this happen. If deflation happens and I think it might ,that is when it’s over for us . Just like I did in the 1930s

I know from Dent’s “Roaring 2000s” book and his other book ten years ago he predicted the USA to be in another Great Depression in 2009 or 2010. LOL. My own approach is to stay primarily in stock mutual funds but put money into other asset classes. As a result there are times I need money. So I sell off a portion of my best performing asset for my need, but at the same time sell more than I need, and put into my lowest performing asset. Kind of rebalancing. I do this with an eye on capital gains, so that it’s spread over the years. It’s my personal style and I do well by it. My own portfolio is depression and inflation resistant.

You make some good points but seem to be mistaken about how the pricing of the stock market works. The simplest way to say it is to parrot Benjamin Graham and Warren Buffett. Over the short term, the market is a voting machine. But over the long term, it’s a weighing machine. Whether people see the true value of the market today or not, if it’s based on nothing, then eventually the market will crash. I’m not responding to Dent here, only to your analysis that if no one but Dent today realizes the worth of stocks, they will stay up forever. Read The Great Crash and you’ll see lots of similar comments in the 1920’s — if only we all believe, then it will keep soaring! Sorry — if only it worked that way. Magic money machine.